20 Define Procurement Contracts Configuration

Define Contract Terms Library Configuration

Contract Terms
Library Setups: How They Work Together

This topic provides a brief overview of setups
for the Contract
Terms Library.

The following figure outlines the main setups for
the Contract Terms Library which are described in the sections of
this topic. The setups on the left are accomplished using tasks from
the Setup and Maintenance work area. To set up most of the Contract
Terms Library features, including clauses and contract terms templates,
you must navigate to the Terms Library work area. Dashed boxes highlight
features that are available only in procurement contracts.

Setups in Oracle Fusion Functional Setup Manager

Contract types
specify properties of different contracts including the type of permitted
contract lines, party roles, contract validation checks, and the contract
acceptance and signature requirements. For the Contract Terms Library,
you can use the Manage Contract Types task to:

Enable contract terms authoring

You must enable contract terms authoring for a contract
type to use any of the library features for contracts of that type.

Specify the Oracle BI Publisher layout
template that will be used to format the printed contract terms for
contracts of this type.

Defining Clause Types

If you want to categorize the clauses in the library, select the Manage Contract Clause Types task to set
up clause types.

Configuring Business Units for Contracts

The use of most of the Contract Terms Library content
is restricted to the business unit where you create it. This includes
clauses, contract terms templates, and Contract Expert business rules.
Using either the Specify Customer Contract
Business Function Properties or the Specify Supplier Contract Business Function Properties tasks, you can:

Enable content adoption between business
units and automatic approvals for content

Specify the Contract Terms Library
administrator, the employee who will receive approvals and other notifications
regarding library content.

Enable the Contract Expert feature
for the business unit.

Creating Contract Layout Templates

Using Oracle BI Publisher, you can set up layout templates
that determine the formatting of clauses, contract terms template
previews, the contract deviations report, and the contract itself.

Download the sample layout templates provided with
your application from the Oracle BI Publisher library. You can copy
and edit the sample layout templates and upload them.

Creating Contract Terms Value Sets

Select the Manage Contract
Terms Value Sets task to set up value sets for use in
contract terms variables and Contract Expert questions.

Specifying the Location of the File
Used for Clause Import

You can import legacy clauses
into the Contract Terms Library, either from a file or from an interface
table using Oracle Fusion Enterprise Scheduler processes.

If you are importing clauses from a file, then you
must specify the location of the file by setting the system profile
option Specify Contract Clause Import XML
File Location by selecting the Manage Clause and Template Management Profiles task.

Contract Terms Library Work Area Setups

The Contract Terms Library is built using the tasks
within the Terms Library work area:

Creating Clauses

Create standard clauses for use during contract terms authoring,
including alternate clauses, clauses included by reference, and provision clauses. By specifying different clause properties, you can modify clause
behavior. For example, you can make clauses mandatory in contracts
or protect them from editing by contract authors.

Creating Variables

You can use variables in the Contract Terms Library to represent
information within individual clauses and for use within Contract
Expert rule conditions. Your application comes with predefined variables,
called system variables. You can create additional variables, called
user variables, with or without programming.

Creating Numbering Schemes

You can set up additional clause and section numbering
for contract terms. You can select which numbering scheme you want
to use with each contract terms template.

Creating Contract Terms Templates

Create contract terms templates to insert boilerplate
terms and conditions into contracts during contract authoring. Contract
authors can apply the templates manually, or the application can apply
the templates automatically using defaulting rules you set up.

Creating Contract Expert Business
Rules

Set up business rules that ensure compliance
of contracts with corporate standards.

Contract Expert makes it possible for you to set up
business rules that can:

Apply the appropriate contract terms template to a contract

For example, apply the contract
terms template Software License and Service Agreement if the contract
is authored in the North America Operations business unit and the
contract amount exceeds one million dollars.

Insert additional clauses into the contract

For example, add an audit clause if an audit is required.

Report contract deviations from corporate
policies

For example, report a contract worth one
million dollars or more that includes payment terms greater than 90
days.

You can base Contract Expert rule conditions on the
values of variables in the contract, the presence of other clauses,
or you can set up questions that contract authors must answer during
authoring.

For example, you can ask authors a series of questions
about the nature of the materials being shipped to customers and insert
additional liability clauses based on their answers.

If you are setting up business rules with numeric
conditions (for instance, insert a special payment terms clause if
the contract amount exceeds $1 million) then you must set up constants
to hold the numeric values. You cannot enter the numeric values directly.

Contract Terms Deliverables

Contract terms deliverables track both contractual and
non-contractual commitments that must be fulfilled as part of negotiations
and purchasing contracts between businesses and their partners. These
deliverables can be used only in purchasing and sourcing documents
that include contract terms. They cannot be used in enterprise contracts. They
are outlined in a dashed box in the figure for this reason.

Importing Clauses

You can import clauses from legacy applications by running Oracle
Fusion Enterprise Scheduler (ESS) processes from the Terms Library
work area by selecting the Import Clauses task or from the Setup Manager by selecting the Manage Processes task.

Setting Up and Maintaining the Index
for Clause Text Searches Using the Keyword Field

By selecting the Manage Processes task in the Terms Library work area, you can also run the ESS processes
required to set up and maintain the text index required for searches
of clauses and contract terms templates using the Keyword field.

Contract Terms
Library Clauses: Explained

You can create different types of clauses for
different uses and use clause properties to specify if a clause is
protected from edits by contract authors, if it is mandatory, and
if it is related to or incompatible with other clauses. A clause you
create in the Contract Terms Library is available for use within the business
unit where you create it after it is approved.

The types of clauses you can create include:

Standard clauses

Clauses included by reference

Provision clauses for contracts with
a buy intent

Using different clause properties you can:

Make a clause mandatory in a contract.

Protect it from edits by contract authors.

Specify that a clause can be selected
by contract authors as an alternate of another clause.

Specify that the clause cannot be in
the same document as another clause.

Make a clause created in a global business unit available for use in other business units.

Creating Standard Clauses

Any clause you create in the library becomes
a standard clause that can be used in the business unit where you
create it after it is approved. Unless you specify that the clause
is protected, contract authors can edit the clause in a specific contract.
Any edits they make are highlighted in a clause deviations report
when the contract is approved. Similarly, contract authors can delete
the clause from a contract, unless you specify the clause is mandatory.

Including Clauses by Reference

For clauses, such as Federal Acquisition Regulation
(FAR), you can print the clause reference in the contract instead
of the clause text itself. During contract creation, you enter the
reference on the Instructions tab of the clause edit page and select
the Include by Reference option.

Creating Provision Clauses for Contracts with a
Buy Intent

For contracts with a buy intent, you can create
provision clauses, clauses that are included in contract negotiations
but are removed after the contract is signed. Provision clauses are
used primarily in Federal Government contracting.

Altering Clause Behavior with Clause Properties

Using different clause properties, you can
alter the behavior of a clause, You can:

Make a clause mandatory.

A mandatory clause is highlighted by a special icon during contract
terms authoring and cannot be deleted by contract authors without
a special privilege. You can make a clause mandatory for a particular
contract terms template by selecting the Make Mandatory action after you have added the clause to the template. A clause
is also become mandatory if it is added by a Contract Expert rule
and you have selected the Expert Clauses Mandatory option in the template.

Protect it from edits by contract authors.

A protected clause is highlighted by a special icon
during contract terms authoring and cannot be edited by contract authors
without a special privilege. You can protect any clause by selecting
the protected option during clause creation or editing.

Specify that a clause can be selected
by contract authors as an alternate of another clause.

You can specify clauses to be alternates of each other on the Relationships
tab of the create and edit clause pages. When editing contract terms,
contract authors are alerted by an icon that a particular clause includes
alternates and can select an alternate to replace the original clause.

Specify that the clause cannot be in
the same document as another clause

You can use
the Relationship tab to specify a clause you are creating is incompatible
with another clause in the library. The application highlights incompatible
clauses added by contract authors in the contract deviations report
and during contract validation.

Make a clause available for use in
other business units.

Clauses you create in the
library are normally available only within the same business unit
where you create them. If you create the clause in the business unit
that is specified as global during business unit setup, then you can
make the clause available for adoption in other business units
by selecting the Global option
during clause creation or edit. This option appears only in the one
business unit specified as global.

Contract Terms
Templates: How They Work

You can create contract terms templates in
the Contract
Terms Library to insert appropriate terms and conditions into
contracts during contract authoring. Contract authors can apply the
templates manually or the application can apply the templates automatically
using defaulting rules you set up.

Contract terms templates:

Contain sections and clauses from the
Contract Terms Library.

Are created in the Contract Terms Library
separately. You cannot create them directly from an existing contract.

Are specific to one business unit.

Apply to enterprise contracts of the contract types you
specify in the template.

Are specific to either sell-intent or buy-intent contracts.

For buy-intent contracts, you can use
contract terms templates to default contract terms directly on purchase
orders and sourcing documents. For these documents, contact terms
templates can also include contract terms deliverables which can be used to track the completion of contractual tasks in
the contract.

In addition, for a contract terms template you can:

Set up Contract Expert rules to recommend
additional clauses for contracts that use the template.

Associate a layout template for previewing
the template.

Specify a contract terms numbering scheme for the template.

Set up template selection rules to
default the template into a contract automatically.

Adding Sections

You can add sections that you have created in the library
or create sections that are specific to the template itself.

Adding Clauses

You can add clauses in one of two ways:

Add a clause from the Contract Terms
Library directly into a section in the template.

You can create the clause in the library from the template if the
library does not have what you need.

Create Contract Expert rules to add
clauses to the contract terms in a contract depending on the specifics
of the contract.

For example, you may want to add a boilerplate jurisdiction
clause directly into the template, but use a Contract Expert rule
to insert the appropriate liability clause. This way a contract that
calls for the shipment of hazardous materials will get a liability
clause that's different from a contract that does not include any,
for example.

The properties that you set up in the clause apply
automatically. If you set up a clause as mandatory, contract authors
will not be able to delete the clause after it is inserted by the
template unless they have the special Override Contract Terms and
Conditions Controls privilege. If you set up a clause with alternates,
then authors can substitute any of the alternate clauses in the contract.

Note

You are not required to add any sections or clauses
to a template directly. You can use Contract Expert rules exclusively,
if appropriate.

Enabling Contract Expert on the Template

If you want to use Contract Expert in a contract where
the template is applied, you must enable the template for Contract
Expert by selecting the Enable option in the Contract Expert region in the Create Terms Template
or Edit Terms Template pages.

When Contract Expert rules enabled for the template
suggest additional clauses, these additional clauses are presented
for review by contract authors before they are inserted in the default
section specified in each clause. Depending on their level of privileges,
some contract authors can choose which clauses to insert and which
to omit. If you make Contract Expert suggestions mandatory for the
template, then only users with the special Override Contract Terms
and Conditions Controls privilege can reject the recommendations.

For Oracle Fusion Purchasing purchase orders and Oracle
Fusion Sourcing contracts, you can track compliance of tasks that
the contract parties have agreed to execute as part of the agreement
by adding contract terms deliverables.

You can use the deliverables to record the status of
the tasks, keep everyone notified of past and future deadlines, and
as a repository of the deliverable documents themselves. For example,
vendors agreeing to supply a monthly report can log in to their sourcing
portal and attach the report or ask for an extension. If they fail
to respond by the specified deadline, the deliverable can trigger
an automatic notification that the deliverable is overdue.

Assigning a Layout Template for Previewing the Contract
Terms Template

You must assign a layout template with the contract
terms template to make it possible for contract authors to get a preview
of the template content, when they need to make a template selection,
for example. The layout template, which you select on the General
tab while editing the contract terms template, specifies what gets
displayed in the preview, including the fields displayed, graphics
such as a company logo, page numbering, headers and footers, and boilerplate
text. This layout template is not used for printing the contract.

The layout template is an RTF file stored in the
Enterprise Contracts folder in the Business Intelligence Presentation
Catalog. A sample layout template is provided with your application.
You can copy the sample template and edit it to create your own as
described in a related topic.

Specifying a Numbering Scheme

You can associate a numbering scheme to the template
that will automatically number sections and clauses in the contract.
Several predefined numbering schemes are available with your application,
and you can create additional numbering schemes of your own.

Defaulting the Template on Contracts

You can have a contract terms template apply automatically
in all contracts based on:

Contract type

Contract Expert rules that select the
template based on the specific information in the contract itself

If you enabled the feature Enable Contract Terms in
Fusion Procurement for the option Procurement Contracts during implementation,
then you can also apply templates to procurement documents based on document type.

The following document types become available:

Auction

Bid

Blanket Purchase Agreement

Contract Purchase Agreement

Standard Purchase Order

RFI

RFI Response

RFQ

Sourcing Quote

While editing the contract terms template, you specify
a template to be the default for a contract type or document type
in the Document Types region. You can set up only one template as
the default for each contract type or document type. You set up the
Contract Expert template selection rules separately as described in
a related topic. You can have multiple rules recommend the same template.

Here is how the defaults you enter in the Document
Types region and the Contract Expert template selection rules interact
to select and apply a template during contract authoring:

Contract Expert template selection
rules always take priority. If the rules specify a single template
for a contract, then it gets applied regardless of the default you
entered in the Document Type region.

If the Contract Expert rules recommend
different templates, then the application uses the default from the
Document Type region as a tiebreaker.

If no Contract Expert selection rule
applies and you specified a default, then the application uses the
default.

If no rule or default was set up
for a contact type or document type, then contract authors must select
the template they want from a list.

Contract Expert
Rules: How They Work

You can set up Contract Expert rules to apply
contract terms templates automatically to contracts, to suggest additional
clauses for insertion during contract terms authoring, and to flag
any contract deviations from company policy.

Each rule comprises conditions that must be met and
the rule results. You can base rule conditions on:

The presence of another clause already
in the contract

The value of a system variable or a user variable

Questions that the contract author
must answer

Different Contract Expert rule types support different
condition types, as illustrated in the following figure.

Clause selection rules, which can default
individual clauses and sections into a contract, can be based on clauses,
questions, and variables.

Template selection rules, which identify
the default contract terms template for the contract, can be based
on variables only.

Policy deviation rules, which flag contract deviations from company policies, use questions and variables only.

Key rule properties include:

All rules can use multiple conditions
linked together with either the AND or OR logical operators.

The values of non-numeric conditions
are supplied by value sets.

The values for numeric conditions are
supplied by constants.

Rule types that permit the inclusion
of questions can trigger follow-up questions, permitting you to chain
rules together.

Rules are restricted to the specific
business unit and the contract intent where you create them.

Rules do not get copied when you copy
a global contract
terms template to another business unit.

Conditions support both logical and
numeric operators:

IS

IS NOT

IN (allows the selection of multiple
values)

NOT IN (allows the selection of multiple
values)

>=: (greater than or equal to)

<=: (less than or equal to)

=: (equal to)

> (greater than)

< (less than)

Clause Selection Rules

Clause selection rules permit you to insert one or
more clauses and sections into a contract.

The following table describes the rule properties.

Rule Property

Details

Rule outcomes

The rule can:

Recommend one or more clauses for insertion
into the contract

Contract authors can review the
Contract Expert recommendations before the clauses get inserted into
the contract. By setting the Expert Clauses
Mandatory option when creating a contract terms template,
you can specify if you want the clause insertion to be mandatory or
if the authors can ignore the recommendations .

If you make the insertion mandatory, then only contract
authors with the Override Contract Terms and Conditions Controls privilege,
a special privilege that allows deleting mandatory clauses from the
contract, can reject the recommendations. Similarly, if the recommended
clauses are standard clauses, then the authors must have the Author
Additional Standard Contract Terms and Conditions privilege to reject
the recommendations. This privilege allows the deletion of standard
clauses from the contract.

Contract Expert inserts each clause in the section
specified as the default for the clause in the Contract Terms Library.
If no default section is specified in the clause, then Contract Expert
inserts the clause into the default section specified in the contract
terms template. Contract Expert automatically inserts the default
section if it does not already exist in the contract.

Ask follow-up questions

You can ask follow-up questions by adding them in the Additional
Questions region of the Results tab. Any additional question that
you add must be part of another rule. Adding the follow-up question
chains the rules together.

When the rule is evaluated

The rule is evaluated every time that a user runs Contract
Expert.

Users receive an warning message during contract validation
if they fail to run Contract Expert.

Conditions

Conditions can be based on:

clauses

questions

variables

You can
use both predefined system variables and user variables. Both types of
user variables are supported: those that require entry by contract
authors and those where the values are supplied by a Java procedure.

Where it applies

The rule applies only within the business unit and
for the intent that you specify. You can have the rule apply to one
of the following:

Specific contract terms templates

All contract terms templates for the
business unit

Contract Terms Template Selection Rules

The application automatically applies a contract terms
template to a contract. Or, if the author removed the contract terms
using the Actions menu, the template displays the template name as
the default when applying a new template.

When the rule is evaluated

The application evaluates the rule whenever the author
navigates to the Contract Terms tab as long as no contract terms template
is applied. If a contract terms template is applied to the contract,
the template selection rules are not executed again, even if changes
to the contract would result in a different rule outcome.

The rule is also evaluated to determine if the contract
contains the recommended template whenever the contract author:

runs the clause deviations report

validates the contract terms or the
contract

In both cases, the rule generates a warning if the
author applied a different template from that recommended by the rule.

Conditions

Variables only

You can use predefined system variables and those user-defined variables where the values are supplied by a Java procedure.

Where it applies

The rule applies only within the business unit and
for the intent specified in the rule.

Contract Expert does not apply a contract terms template
if the contract terms template defaulting rules you set up recommend
multiple terms templates for a single contract. Instead, Contract
Expert applies the contract terms template specified as the default
for the business document
type during contract terms template setup. If no document type
default is specified, then the application displays the Add Contract Terms button and permits authors
to select a template of their own choice. The choices are restricted
to the templates specified for the contract type.

Policy Deviation Rules

Policy deviation rules flag deviations from company
policies on the contract deviations report. This report is run by
the contract author before submitting a contract for approval.

The following table lists the rule properties.

Rule Property

Details

Rule results

The rule displays a deviation in the contract deviations
report.

The rule name becomes the deviation.

When the rule is evaluated

The rule is evaluated whenever the user:

Runs the contract deviations report

Validates the contract terms or the
contract

Conditions

Conditions can based on:

Questions

Variables

Both predefined system variables and
those user-defined
variables where the values are supplied by a Java procedure.

Where it applies

The rule applies only for the contract terms templates
within the business unit and for the intent that you specify.

The following figure illustrates the policy deviation
rule setup. You can build rule conditions out of both questions and
variables. In the contract deviation report, your entry in the Rule Name field becomes the deviation name
and your entry in the rule Description field becomes the deviation description.

Policy deviation rules list policy deviations in the
contract deviations report, along with any clause deviations that
are flagged automatically by the application. Contract authors can
run the report before submitting the contract for approval and enter
comments to explain the deviation to the approver. The report is rerun
automatically when the author submits the contract for approval and
a copy of the report is attached to the approval notification.

Activating and Validating Rules

After you set up a rule, you must activate it using
the Activate Rule action. Rules do not require approval before activation,
but the contract terms templates that they apply to do.

Note

In order to activate a rule, you must assign it to
at least one contract terms template. The template does not have to
be approved at the time that you make the assignment, but it does
have to be approved before the rule can be used.

Activating a rule triggers an automatic validation
process. You must correct all errors before the rule gets activated.